Investing in Healthcare in VietnamKPMG Vietnam Webinar30 November 2017
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“Investing in Healthcare in Vietnam” Agenda
Investing in Vietnam Webinar Series, KPMG Vietnam, 30 November 2017
14:00 - 14:05 Introduction
14:05 - 14:15 Vietnam healthcare system at a glance
14:15 - 14:25 Legal forms of operation for healthcare sector in Vietnam
14:20 - 14:40 Market trends and investment opportunities
14:40 - 15:00 Question &Answer
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2
Question and Answer SessionPlease submit questions in chat window (bottom right corner of screen) any time.
Don’t forget to hit SEND.
I will compile the questions and submit them to the speakers in the last 20 minutes of the webinar, as time permits
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Key PresenterMichal Jacob is an Israeli lawyer and a certified foreign lawyer by the Ministry of Justice in Vietnam. She has been living and working in Vietnam since 2006 and has over 22 years of professional legal and business management experience both in Israel and Vietnam focusing on the Healthcare and Life Sciences sector. Michal has worked with public and private healthcare providers, regulators and insurers both in Israel and in Vietnam and was the lead advisor to the second largest Health Maintenance Organization (HMO) in the world.
Michal’s vast experience in healthcare has provided her with in-depth understanding of private and public healthcare systems, including insurance and reimbursement plans, with a pragmatic approach to support clients in achieving the objective of improving efficiency and quality of healthcare services.
Michal Jacob Director &Head of Healthcare and Life SciencesKPMG [email protected]
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Introduction
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Vietnam demographics – Age structure
0–14 years 24.6%
15–64 years 69.8%
65 and over 5.5%
24.60%
69.80%
5.50%
0-14 15-64 65 and over
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Young consumer baseA young population and rapid adoption of modern technology create an exciting window of opportunity for change
…Together with rising disposable incomes, a golden demographic structure and higher living standards have set Vietnam apart as one of the most attractive investment destinations in Asia
62.3%
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Consumption growthA young population and rapid adoption of modern technology create an exciting window of opportunity for change
7.8 8.3
10.812.2
13.1 13.815.1
16.017.2
18.619.9
6.9%6.2%
7.0% 7.2% 7.1% 7.2%7.4%
7.3% 7.3% 7.3% 7.3%
0%
2%
4%
6%
8%
5
10
15
20
25
% G
DP
US
D b
illi
on
Healthcare spending
Healthcare spending (% of GDP)
Stable growth at 7.3% of total GDP
Projected Vietnam healthcare expenditure 2010-2020
86 103
115 128
141 147 154 164
175 185
196
-
50
100
150
200
250
US
D B
illio
n
Vietnam personal disposable income in 2010 - 2020
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Facebook Users – Vietnam – 2014 - 2020
37.334.7
31.8
25
39.842
43.9
2014 2015 2016 2017 2018 2019 2020
Number of users in millions
Vietnamhealthcare system ata Glance
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Real GDP growth fluctuated over thelast five years and is expected to increased slightly to y-o-y growth rateof 6.6% by 2026- Real GDP growth of Vietnam in 2016 is higher
than some ASEAN countries such as Thailand (3.2%), Malaysia (4.2%), Indonesia (5.0%), Myanmar (5.4%), Singapore (2.0%), etc.
- The growth in real GDP in the next ten years is driven by the increasing FDI inflows, higher income, continuing trade in goods and services, foreign trade agreements and government’s objective to industrialize the country by 2020.
- Subsequently, GDP per capita is anticipated to increase at CAGR of 9.4% to reach USD5,231 by 2026, thanks to a fast growing economy.
1,504 1,718 1,862 2,007 2,044 2,1282,297 2,511
2,7473,012
3,3013,618
3,9644,346
4,7675,231
6.2
5.2 5.46.0
6.76.2
6.5 6.7 6.5 6.5 6.5 6.5 6.6 6.6 6.6 6.6
Real GDP Growth (% y-o-y)
Source: Business Monitor International
GDP per capita (USD)
11-16: 7.2%
16-21F: 9.4%
Key macroeconomic indicators
National-level demographic and socioeconomic indicators (1 /3)GDP INDICATORS (2011 – 2026F)CAGR of GDP per capita
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3
Disposable income per household inVietnam in 2016 is expected to grow in-line with the growth in economic trends- There will be an upward trend in Vietnam
disposable income per household by 2021 to reach USD4,604 at CAGR of 3.8% (2017–2021F) which is in alignment with the economy’s growth. Increasing income indicates higher living standards, better awareness on health and well-being and potentially expenditures on healthcare and related services
In 2016, middle- and high-incomeclasses (Class A, B and C) accountedfor 28% of Vietnam‘s population- The number of people classified into the middle
and high income social classes is rising and is expected to reach 33 million by 2030, providing positive indications and opportunities for private healthcare services
Note:(a)Only includes population between the age group of 15 – 65+ years old(b)Social Class data refer to the number of individuals whose incomes fall
within a specified range of the averagegross income of all individuals aged 15+ in that country or region. Social Class A: +200%; Social Class B: between 150% and 200%; Social Class C: between 100% and 150%; Social Class D: between 50% and 100% and Social Class E: less than 50% of the average gross income.(c)Based on exchange rate of VND/USD 22,650
3,412 3,386 3,424 3,498 3,687 3,820 3,942 4,088 4,256 4,430 4,604
2020F 2021F2011 2012 2013 2014 2015 2016 2017F 2018F 2019FSource: Business Monitor International
41% of 72.6 millionpeople
31% of 72.6 millionpeople
13% of 72.6 millionpeople
6% of 72.6 million people
9% of 72.6 millionpeople
E
D
C
B
A
Source: Euromonitor
Average gross income per year: USD2,358(c)
SOCIAL CLASS DISTRIBUTION IN 2016 (AGED 15+) (a)(b)
DISPOSABLE INCOME PER HOUSEHOLDFROM 2011 TO 2021F (USD)
Key macroeconomic indicators
National-level demographic and socioeconomic indicators (2/3)
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By 2025, Vietnam’s population is expectedto reach approximately 102.8 million atCAGR of 0.94% in the period 2015-2025F
- In 2016, Vietnam enjoys what is known as the “golden population structure”, which means for every two people or more working, there is only one dependent. This demographic bonus provides Vietnam with a unique socio-economic development opportunity to take advantage of the young labor force and push its economic growth
- However, it is observed that the population in Vietnam is aging rapidly, and the proportion of older people will continue to increase which boosts demand for healthcare services
3,240
1,192
726843
1,339
3456
882
580421
555
5-9yrs 3860 3,5050-4yrs 4089 3,677
10-14 yrs
60-64 yrs 1632 1,93755-59 yrs 2267 2,52250-54 yrs 2718 2,83845-49 yrs 3038 3,07740-44 yrs 3351 3,39035-39 yrs 3627 3,66030-34 yrs 4052 4,03525-29 yrs 4452 4,35720-24 yrs 4335 4,15515-19 yrs 3475 3,289
80+ yrs75-79 yrs70-74 yrs65-69 yrs
Male Female
Working age population Total (15-64
years) = 70% of total pop
YoungpopulationTotal (0-29
years) =49%of total popn
Source: Euromonitor
22,897 20,949 21,609 22,557 22,780
24,636 25,703 24,473 22,230 20,537
31,226 36,026 41,179 45,651 49,071
5,550 5,7956,311 7,923 10,376
84,309 88,47393,572
98,360 102,763
2005 2010 20150-14 yrs 15-29 yrs
2020F30-64 yrs
2025F65+ yrs
Source: Euromonitor
POPULATIONSIZE IN VIETNAM (‘000)
POPULATION BY AGE IN 2016(‘000)
Key macroeconomic indicators
National-level demographic and socioeconomic indicators (3/3)
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The total health expenditure has increased over the years and is forecast to continuean upwards trend with 58.1% contributedby public healthcare expenditure by 2021- Vietnam’s total healthcare expenditure accounted
for 7.5% of its total GDP for 2016, which is higher than selected developed ASEAN countries such as Thailand, Singapore and Malaysia (6.2%, 6.1% and 4.5% respectively). By 2021, it is forecasted to decrease slightly to 7%;
- The public healthcare expenditure overtook the private healthcare expenditure since 2012 due to the governments’ social health insurance program to increase prepayment in the healthcare sector;
- In the next 5 years, public healthcare expenditure is predicted to increase at a CAGR (2016 – 2021F) of 9.5% compared to the period of 2011 to 2016 (17.2%). This is partly due to the government’s effort in promoting partnership between public and private healthcare providers to share the cost;
- Private healthcare expenditure is expected to grow at a CAGR of 7.5% with a large part of the growth due to increased insurance coverage for employeesSource: Business Monitor International
3.8
5.86.5
7.17.6
8.49.0
9.910.8
11.9
4.6 5.05.7 6.0 6.3 6.7 7.1
7.68.2
8.89.6
6.2 7.0 7.2 7.1 7.2 7.5 7.3 7.2 7.2 7.1 7.0
2011 2016 2017F 2018F 2019F 2020F 2021F2012 2013 2014 2015
Public expenditure (USD billion) Private expenditure (USD billion)
Healthcare expenditure (% ofGDP)
CAGR 11-16 12.5% 17.2% 7.9%CAGR 16-21F 8.6% 9.5% 7.5%
Total healthcare spending (USD billion)
8.310.8
12.213.1 13.8
15.016.1
17.419.0
20.722.7
13.2
PUBLIC AND PRIVATE HEALTHCARE EXPENDITURE (2011 – 2021F)
Overview of healthcare indicators
Healthcare expenditure
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Central
Central-affiliated province/city
District
Commune
Source: World Health Organization, Vietnam’s Ministry Of Health
Commune Health Stations
District Health Centers
HospitalsClass II, III
State-level Departments of
health
Hospitals:Class I, II
Other ministries
- The Ministry of Health (MOH) of Vietnam looks after the health sector for the government. MOH manages a number of health institutions including national hospitals, research and institutes, universities and colleges.
- Vietnam operates a decentralised healthcare system where autonomy is given at the province, district and commune level to provide guidance, monitoring and supervision of the healthcare policies to their respective areas
- Other ministries including MOD, MOT, MOIT, and MARD run health-care network of hospitals and clinics
Hospitals:Class Special, I
MOH
- There are 63 provinces in Vietnam and each province is divided into districts
- Provincial health institutions consists of general, specialized hospitals, and medical centers. Besides, each province usually has a medical college or secondary medical school offering programs in medicine, nursing, midwifery, medical technology and pharmacy depending on the province’s medical demand.
- Apart from general hospitals, intercommune polyclinics, and maternity homes, district health centers also offers medical and preventive services.
- Other department such as the population, food safety management agencies involve in health sector depending on the population size and local provisions.
- Commune health stations are responsible for providing primary health care services for people in the commune.
ORGANISATIONAL STRUCTURE OF HOSPITAL AND HEALTHCARE SYSTEM IN VIETNAM
Overview of healthcare indicators
Hospital system in Vietnam
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1,117
133
1,250
2011
HO
SPIT
ALS
2016Private
Private 13.7%
3.4%
3.6%
79.2%Public 86.3%
Ministry ofHealth
Other ministries/State-owned corporation
Department ofHealth
1,161 hospitals
1,346hospitals
In 2016, there was a total of 1,346 hospitals in Vietnam with the majority of public hospitals directly managed by departments of health of each province / city, while the remaining owned by the Ministry of Health, other ministries and state-owned corporations.- In the last five years, private hospitals increased by 52 hospitals due to the
government's promulgation of public-private partnership (PPP) policies to help reduce the overload of public hospitals, as well as adjustment in health insurance policies in 2016 that bring greater revenue for private hospitals.
- Meanwhile, the number of public hospitals expanded by 44 hospitals over the last five years with financial support from the government.
- Number of hospital beds in the last five years increased by 45,400 beds contributed both by the expansion of public and private hospitals. The government aims to grow the number of private hospital beds to account for 20% of total hospital beds by 2020, through the implementation of public and private partnership.
Source: General Statistics Office, Business Monitor International
Public
Source: General Statistics Office, Business Monitor International
1,346
CAGR 11-16
1.5%
185 6.8%
0.8%
1,161
203,200240,700
14,185209,485
6,285
254,885
BED
S
2011Public
Source: General Statistics Office, Business Monitor International
2016Private
3.4%
17.7%
CAGR 11-16
4.0%
NUMBER OF HOSPITALS IN VIETNAM (2011-2016)
NUMBER OF HOSPITAL BEDS IN VIETNAM(2011-2016)
HOSPITALS BREAKDOWN BY PUBLIC AND PRIVATE
Overview of healthcare landscape
National-level hospital infrastructure
Legal formsof operationin healthcaresector
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Business Form of operation
Scope of operation of legal entity
Foreign participation ratio
Local partner required (Y / N)
Capital requirement(Yes/No/How much)
Other requirements
Notes
Healthcare treatment
- Legal entity: 100% ForeignInvested Enterprise (FIE) and JointVenture (JV)
- Business Cooperation Contract (BCC - not popular)
- Rep. Office (RO) for nonprofit purposes
- Hospital services- Medical and
dental services
- Exclusion: Emergency evacuation services, homecare and nursing services are not committed to open to foreign investors, foreign investment would be subject to approval on case-by-case basis.
100% No Yes
Capital investment requirement: - Hospital:
USD20 million- Polyclinic:
USD2 million- Specialized
clinic: USD200,000
- Qualified personnel and facilities
- Operational licenses
Family Medical Practice, a 100% FIE, was granted with emergency evacuation services, homecare,nursing services
Pharma-ceutical
- Legal entity: 100% FIE and JV
- RO (for nonprofit purposes)
All activities (manufacturing, import, export, storage, testing), except for distribution
100% No No, but must be appropriate for the business
- Qualified personnel and facilities
- Operational licenses
No FIE licenses for import of pharmaceuticals as of today
Legal Forms of Operation in Healthcare (1/2)
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Business Form of operation
Scope of operation of legal entity
Foreign participationratio
Local partner required (Y / N)
Capital requirement(Yes/No/How much)
Other requirements
Notes
Medical device
- Legal entity: 100% FIEand JV
- RO (for non-profit purposes)
All activities (manufacture, import, export, distribution)
100% No No, but must be appropriate for the business
- Qualified personnel and facilities
- Operation licences
Medical training &education
- Legal entity: 100% FIE and JV
- RO (for nonprofit purposes)
University, short-term training, vocational training
100% No YesCapital investment requirements: - University:
USD6,500/student, minimum USD13 million
- Vocational training school: USD2,600/ student
- Short-term training school: USD900/student
- Qualified personnel and facilities
- Operational licenses
Hoa Lam Shangri-La obtained approval from PM for setting up a foreign-invested international medical and pharmacy university in 2016.
Legal Forms of Operation in Healthcare (2/2)
Markettrends & opportunities
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Global drivers on healthcareGlobalization, consumerism and prosperity are major drivers that impact healthcare in Southeast Asia, including Vietnam
Globalization – world is becoming smaller: cheap air travel, connectivity, internet, medical tourism
Consumerism - Increased awareness and self-decision making in choosing of medical treatment options: potential treatment, available hospitals and choice of physicians
Prosperity – Increasing disposable income, financial independence and health awareness has led to consumers spending more on health prevention andtreatment
Consumerism
Globalization Prosperity
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Market trends – Vietnam National GoalsFrom Vietnam Sustainable Development Strategy and Goals for 2011-2020 (to be extended to 2030):
— To raise the quantity and quality of healthcare services— To speed up comprehensive healthcare— Focusing on proactive preventive medicine, timely and effectively control epidemic
diseases, early detect and timely cure diseases— Consolidate and enhance medical system towards diversification of healthcare models
and stakeholders, in which public healthcare establishments take the leading role— Establish the system for provision of comprehensive healthcare services, focusing on
basic health services and primary healthcare services— Improve the quality of healthcare rehabilitation services at all levels— Reduce patient overload in central-level hospitals. Upgrade infrastructure and working
conditions of communal or ward medical stations— Speed up human resource development for healthcare sector and social workers; train
community health workers, medical technicians.
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Market - Key trends
Shifting from Hospitals to Primary Care and Home Care, and developing Medical Centers of Excellence
Universal Healthcare Coverage and Insurance reformShifting towards Top-up instruments and Private insurance
Health IT and digital solutions
PPP (Public-Private-Partnership) in healthcare
Next growing medical devices and pharmaceutical manufacturing industry
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Market - Key challenges Increase public trust and quality of care
– Patient journey and experience
Patient education and change of mindset
Training, medical education and qualifications
Quality and safety standards (JCI)
Healthcare for all – universal coverage
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